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Diahuebs 30 di Juni 2022

Notes to the Abbreviated Financial Statements (continued)

Business model assessment of the consideration received is recognised in the statement of including historical experience and forward-looking information
The Company’s business units determine their business models at income. In addition, on derecognition of an investment in a debt that is available without undue cost or effort. Forward-looking in-
the level that best reflects how it manages groups of financial as- instrument classified as at fair value through other comprehensive formation considered includes the future prospects of the indus-
sets to achieve its business objective. Factors considered by the income, the cumulative gain or loss previously accumulated in the tries in which the Company’s debtors operate, obtained from eco-
business units in determining the business model for a group of fair value reserve is reclassified to the statement of income. nomic expert reports, financial analysts, governmental bodies and
assets include: other similar organisations, as well as consideration of various ex-
• the stated policies and objectives for the Company of assets A financial liability is derecognised when it is extinguished, dis- ternal sources of actual and forecast economic information that
and the operation of those policies in practice. These include charged, cancelled or expires. relate to the Company’s core operations.
whether management’s strategy focuses on earning con-
tractual interest income, maintaining a particular interest (d) Modifications of financial assets The quantitative assessment to identify whether a significant in-
rate profile, matching the duration of the financial assets If the terms of a financial asset are modified, the Company evalu- crease in credit risk has occurred for an exposure is performed by
with the duration of any related liabilities or expected cash ates whether the cash flows of the modified asset are substantial- comparing:
outflows or realising cash flows through sale of the assets; ly different from that of the original asset. If the terms are substan-
• how performance of the Company of assets is evaluated tially different, the Company derecognises the original financial • the remaining lifetime probability of default as at the reporting
and reported to management; asset and recognises a new financial asset at fair value. The date date; with
• the risks that affect the performance of the business model of modification is consequently considered to be the date of initial • the remaining lifetime probability of default for this point in
(and the financial assets held within that business model) recognition for impairment calculation purposes, including for the time that was estimated at the time of initial recognition of the
and how those risks are managed; purpose of determining whether a significant increase in credit risk exposure.
• how managers of the business are compensated (for exam- has occurred. The Company also assesses whether the new finan-
ple, whether the compensation is based on the fair value of cial asset recognised is deemed to be credit-impaired at initial rec- The qualitative assessment to identify whether credit risk has in-
the assets managed or on the contractual cash flows col- ognition, especially in circumstances where the modification was creased significantly since initial recognition takes into account the
lected); driven by the debtor being unable to make the originally agreed following:
• the frequency, volume and timing of sales of financial assets payments.
in prior periods, the reasons for such sales and expectations • the remaining lifetime probability of default as at the reporting
about future sales activity. If the cash flows of the modified asset are not substantially differ- date; with
ent, the modification does not result in derecognition of the finan- • the remaining lifetime probability of default for this point in
The solely payment of principal and interest (SPPI) test cial asset. The Company recalculates the gross carrying amount of time that was estimated at the time of initial recognition of the
‘Principal’ for the purpose of this test is defined as the fair value of the financial asset based on revised cash flows, discounted at the exposure.
the financial asset at initial recognition and may change over the original effective interest rate (or credit-adjusted effective interest
life of the financial asset (for example, if there are repayments of rate for purchased or originated credit-impaired financial assets), The qualitative assessment to identify whether credit risk has in-
principal or amortisation of the premium/discount). ‘Interest’ is and recognises the amount arising from adjusting the gross carry- creased significantly since initial recognition takes into account the
defined as consideration for the time value of money and for the ing amount as a modification gain or loss in the statement of in- following:
credit risk associated with the principal amount outstanding during come.
a particular period of time and other basic lending risks and costs, • Actual or expected significant deterioration in the financial in-
as well as a profit margin. Impairment of assets strument’s external (if available) or internal credit rating;
• Actual or expected significant adverse changes in business,
Where the business model is to hold assets and collect contractual Impairment of financial assets financial or economic conditions that are expected to cause a
cash flows or to collect contractual cash flows and sell, the Com- At each reporting date, the Company assesses, on a forward-look- significant change to the debtor’s ability to meet its obliga-
pany assesses whether the financial assets’ cash flows represent ing basis, the expected credit losses (ECL) associated with its fi- tions;
solely payments of principal and interest. In making this assess- nancial assets measured at amortised cost and fair value through • Actual or expected significant changes in the operating results
ment, the business units consider whether the contractual cash other comprehensive income (excluding equity instruments). of the debtor;
flows are consistent with a basis lending arrangement i.e. the defi- The Company measures loss allowances on its debt instruments • Significant increases in credit risk on other financial instru-
nition of interest. Where the contractual terms introduce exposure at an amount equal to lifetime ECL, except in the following cases, ments of the debtor;
to risk or volatility that are inconsistent with a basic lending for which the amount recognised is 12-month ECL: • Significant changes in the expected performance and be-
arrangement, the related financial asset is classified and measured haviour of the debtor, including changes in the payment sta-
at fair value through profit or loss. • Debt securities that are determined to have low credit risk at tus of debtor;
the reporting date; and • Actual or expected significant adverse change in the regula-
Equity instruments • Other financial instruments for which credit risk has not increased tory, economic, or technological environment of the debtor
Subsequent to initial recognition, the Company measures all equity significantly since initial recognition. that results in a significant change in the debtor’s ability to
investments at fair value, and changes in the fair value of equity meet its debt obligation.
instruments are recognised in the statement of income. Lifetime ECL are the ECL that result from all possible default
events over the expected life of a financial asset, whereas Irrespective of the outcome of the above assessment, the Group
(c) Derecognition of financial assets 12-month ECL are the portion of ECL that results from default presumes that the credit risk on a financial asset has increased
A financial asset (or when applicable, a part of a financial asset or events that are possible within the 12 months after the reporting significantly since initial recognition when contractual payments
part of a group of similar financial assets) is derecognised when: date. are more than 30 days past due, unless the Group has reasonable
• The rights to receive cash flows from the asset have expired. and supportable information that demonstrated otherwise. In the
• The Company retains the right to receive cash flows from the For receivables, the Company applies the simplified approach per- prior year, several of the Group’s insurance subsidiaries offered a
asset, but has assumed an obligation to pay them in full mitted by IFRS 9, which requires expected lifetime losses to be deferral in premium payments to support customers during the
without material delay to a third party under a ‘pass-through’ recognised from initial recognition of the receivables. Covid-19 pandemic. Many of these deferrals have since expired,
arrangement. Loss allowances for ECL are presented in the financial statements and customers have been required to either resume monthly pay-
• The Company has transferred its rights to receive cash flows as follow: ments or fully bring their accounts back up to date.
from the asset and either:
- has transferred substantially all the risk and rewards of the • Financial assets measured at amortised cost: the loss allowance Despite the aforementioned, the Company assumes that the
asset, or is deducted from the gross carrying amount of the assets in the credit risk on a financial instrument has not increased significantly
- has neither transferred nor retained substantially all the statement of financial position. Movement in ECL is recognised in since initial recognition if the financial instrument is determined to
risks and rewards of the asset, but has transferred control the statement of income. have low credit risk at the reporting date. A financial instrument is
of the asset. • Debt instruments measured at fair value through other compre- determined to have low credit risk if the financial instrument has a
hensive income: the loss allowance is recognised in other com- low risk of default, the debtor has a strong capacity to meet its
When the Company has transferred its right to receive cash flows prehensive income with the corresponding entry recognised in contractual cash flow obligations in the near term and adverse
from an asset and has neither transferred nor retained substantial- the statement of income. The loss allowance does not reduce changes in economic and business conditions in the longer term
ly all the risks and rewards of the asset nor transferred control of the carrying amount of the financial asset in the statement of fi- may, but will not necessarily, reduce the ability of the debtor to
the asset, the asset is recognised to the extent of the Company’s nancial position. fulfil its contractual cash flow obligations. The Company considers
continuing involvement in the asset. Continuing involvement that a debt instrument to have low credit risk when its credit risk rating
takes the form of a guarantee over the transferred asset is mea- Significant increase in credit risk is equivalent to the globally understood definition of ‘investment
sured at the lower of the original carrying amount of the asset and In assessing whether the credit risk on a financial instrument has grade’.
the maximum amount of consideration that the Company could increased significantly since initial recognition, the Company com-
be required to repay. pares the risk of a default occurring as at the reporting date with Credit-impaired financial assets
the risk of default occurring as at the date of initial recognition. In At each reporting date, the Company assesses whether financial
On derecognition of a financial asset measured at amortised cost, making this assessment, the Company considers both quantita- assets carried at amortised cost and debt instruments carried at
the difference between the asset’s carrying amount and the sum tive and qualitative information that is reasonable and supportable, fair value through comprehensive income are credit-impaired.
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